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Lori Shefchik Bhaskar - Indiana University, Kelley School of Business. Bloomington, IN, US

Lori Shefchik Bhaskar Lori Shefchik Bhaskar

Assistant Professor of Accounting | Indiana University, Kelley School of Business

Bloomington, IN, UNITED STATES

Lori Shefchik Bhaskar has expertise in decision-making in accounting with specific interest in audit quality, and internal controls.

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Biography

Lori Shefchik Bhaskar is an Assistant Professor in the Accounting department. Her areas of expertise include judgment and decision-making in accounting with specific interests in audit quality, audit regulation, internal controls, and individual auditor attributes.

Industry Expertise (2)

Accounting

Education/Learning

Areas of Expertise (4)

Professional Skepticism

Audit Quality

Judgement and Decision Making in Accouting

Audit Regulation

Education (3)

Georgia Institute of Technology: Ph.D. 2014

University of Wisconsin-Whitewater: M.P.A. 2005

University of Wisconsin-Whitewater: B.A. 2004

Articles (5)

Integration of Internal Control and Financial Statement Audits: Are Two Audits Better than One? Social Science Research Network

2018

The quality of financial statement (FS) audits integrated with audits of internal controls over financial reporting (ICFR) depends upon the quality of ICFR information used in, and its integration into, FS audits. Recent research and PCAOB inspections find auditors underreport existing ICFR weaknesses and perform insufficient testing to address identified risks, suggesting integrated audits – in which substantial ICFR testing is required – may result in lower FS-audit quality than similar FS-only audits. We compare a 2007 – 2013 sample of small, U.S. public company firm-years receiving integrated audits (accelerated filers) to firm-years receiving FS-only audits (non-accelerated filers) and find integrated audits are associated with higher likelihood of material misstatements and discretionary accruals, consistent with lower FS audit quality. We also find evidence of (1) auditor judgment-based integration issues and (2) low-quality ICFR audits harming FS audit quality. Overall, results suggest an important potential consequence of integrated audits is lower FS audit quality.

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Are 'Good' Auditors Impacted More by Depletion? Threats to Valued Auditor Attributes Social Science Research Network

2016

Auditing involves activities that psychology research characterizes as requiring self-regulation — such as switching mindsets, complex thinking, and resisting temptations. This line of literature characterizes the phenomenon whereby individuals use self-regulation resources for an action, and then have insufficient resources for a subsequent action requiring self-regulation (as such resources are limited), as depletion. We develop new theory that depletion impairs auditor performance, especially for “good” auditors (those who naturally engage in more effortful processing in complex tasks via their inherent attributes). We conduct two experiments examining how depletion interacts with examples of auditor attributes predictive of more effortful processing — professional identity and trait skepticism. Consistent with predictions, results show that the effects of depletion on performance are amplified at higher levels of the attributes. Specifically, we find that the positive relationships between the auditor attributes and performance on a complex audit task absent depletion (i.e., in the control condition) are eroded when individuals are depleted. Process-model results support our theory that effortful processing mediates the relationships between the attributes and performance and that depletion impairs individuals’ effortful processing, which negatively impacts performance. These findings help explain why “good” auditors sometimes fail to provide effective audits — their performance on complex tasks is limited under depleting conditions.

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Debt Covenant Violations, Firm Financial Distress, and Auditor Actions Social Science Research Network

2015

We conduct a comprehensive study on the associations between debt covenant violations (“violations”) and auditor actions for financially distressed and non-distressed firms. Our study is motivated by a lack of research on the consequences of violations resulting from auditors’ actions. We find that firms with violations have significantly higher audit fees, a greater likelihood of receiving a going concern opinion, and a greater likelihood of experiencing an auditor resignation. Importantly, the positive associations hold for all types of firms, including financially non-distressed firms. In fact, we find that, after controlling for other financial information, the relation between violations and an increased likelihood of a going concern opinion is stronger for non-distressed versus distressed firms. Our evidence is consistent with belief-revision research in auditing that finds auditors react more strongly to information that is inconsistent with their prior beliefs. This study provides further evidence on the indirect yet significant consequences of covenant violations on firms resulting from auditor actions.

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Audit Quality: Insights from the Academic Literature Social Science Research Network

2012

This study presents a review of academic research on audit quality. We begin with a review of existing definitions of audit quality and describe general frameworks for establishing audit quality. Next, we summarize research on indicators of audit quality, such as inputs, process, and outcomes. Finally, we offer some suggestions for future research. The study should be useful to academics interested in audit quality as well as to the Public Company Accounting Oversight Board (PCAOB) and other regulators.

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The Effect of Prior Consulting Work on Internal Auditors' Evaluations of Internal Controls Social Science Research Network

2012

We analyze internal auditor objectivity by examining whether consulting work performed by internal auditors influences their subsequent judgments. We conduct an experiment with experienced internal auditors. We present them with an internal control scenario representing an at-margin internal control deficiency (i.e., borderline between a significant deficiency and a material weakness) and ask participants how likely they are to conclude that the deficiency is a material weakness. We manipulate the extent of prior involvement with the internal control (consulted on the design of the control or no prior involvement) and the type of the control deficiency (deficiency in design effectiveness or operating effectiveness). Consistent with our predictions, we find some evidence that internal auditors who had prior involvement in consulting on the design of the control are less likely than others to conclude that the deficiency is a material weakness, but only when the deficiency being evaluated relates to the design effectiveness of the control. The results have important practical and regulatory implications. According to professional standards, consulting on the design of internal controls is not presumed to impair internal auditors’ objectivity, yet we find a systematic influence on subsequent evaluations for purposes of reporting on internal control over financial reporting.

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